Modest house price growth of up to 3% is expected for 2025, along with a small increase in the number of transactions, according to a high street bank.
Mortgage affordability is expected to remain a challenge for borrowers next year, but with positive employment conditions, modest house price growth is expected, says Halifax.
The bank’s UK Housing Market Review and Outlook for 2025 recorded a 4.8% rise in property prices over the last 12 months, the strongest pace of annual growth since November 2022.
First-time buyer homes rose by 4.1% over the last 12 months, while homemovers were faced with a 5% price increase.
Transaction volumes, meanwhile, have returned to pre-pandemic levels.
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Prices rise by 56% in 10 years
Property prices only fell once this year, when a 0.9% decline was recorded in March.
The average UK house price is now at a record high of £298,083, compared to £284,442 a year ago – a rise of £13,641.
The last peak prior to 2024 was in June 2022, when house prices rose to £293,507.
The typical UK house price has increased by 56% over the last decade, a rise of £106,845, while average property prices are £58,907 (24.6%) higher than at the onset of the pandemic.
Amanda Bryden, head of Halifax Mortgages, said: “2024 was a year when UK property prices once again defied expectations. The market remained largely flat until the summer, with most of that growth concentrated in the second half of the year.”
Bryden said two key factors – lower mortgage rates and income growth – have driven the recovery in the housing market over the last 12 months.
According to Halifax, at times during the year, rates have been 160 basis points (bps) below the peaks of 2022 and 2023.
Income growth, meanwhile, has continued to catch up with the consumer price increases of the past few years. For new mortgages, monthly costs as a percentage of earnings fell from 33% to 29% over the last year.
Bryden added: “This easing financial pressure has boosted buyer confidence as demand for mortgages reached its highest level in more than two years, with volumes now back in line with pre-pandemic levels, having trailed by around 20% at the start of the year.
“The uneven availability of properties for sale across the country, relative to demand, also continues to underpin prices. Higher mortgage rates compared to a few years ago may have made some homeowners hesitant to sell, to avoid triggering an immediate increase in their monthly mortgage cost when they move.”
Mortgage affordability remains a challenge
Looking ahead to 2025, price growth has been forecast to range between 0% and 3%. Bryden said mortgage affordability remained a challenge, and with the pace of further base rate cuts expected to be more gradual than previously anticipated, many homeowners whose low fixed rates are due to expire face high refinancing costs.
She added that continuing positive employment conditions should prop up buyer demand, but a small decline in transactions was expected.
